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US House Passes Democrat Tax Cuts Bill

by Mike Godfrey, Tax-News.com, Washington

06 December 2010


Despite the fact that no decision on the subject was taken at the recent meeting between President Barack Obama and leading Republicans and Democrats, and that negotiations are presently being held to discuss the possibility of common ground, Democrats in the US House of Representatives have gone ahead and voted through their version of extending the Bush tax cuts.

During this lame duck session of Congress, before the Republicans become the majority party in the House after the mid-term elections, the main point of contention between the President and the Republican party continues to be whether it will be possible to extend some or all of the individual tax cuts enacted under the presidency of George W. Bush, which are due to expire at the end of this year.

While Republicans have proposed extending the tax cuts in their entirety, since they believe that nobody, and particularly small business owners, should be subject to higher taxes as the pace of the economic recovery is still uncertain, both President Obama and Democrats have insisted that Congress should only extend the Bush tax cuts for those taxpayers making less than USD250,000 a year, due to the high USD700bn fiscal cost entailed in their extension for those earning above that amount.

While, after the recent meeting, President Obama confirmed that he “thought it was a productive meeting,” and that “people came to it with a spirit of trying to work together”, Democrats in the House appeared to have jumped the gun and passed a bill permanently extending the tax cuts for taxpayers earning less than USD250,000 per year, but letting them lapse for those with earnings above those levels.

As Nancy Pelosi, the outgoing Speaker of the House said during the debate, “there will be no tax bill for any situation unless there is a tax cut for middle-income people in our country. That is what this vote is about today. That is our declaration. That is what we send to the table for the discussion that the President has so rightfully called for.”

What the Republicans are saying, she added, is that, “unless you give an additional tax break to the wealthiest people in our country, adding to the deficit and not creating jobs, we are not going to vote for middle-income tax cuts.”

A statement by Obama's Press Secretary following the vote in the House suggested that the President is also not yet ready to cross the tax cut Rubicon: “[the President] continues to believe that extending middle class tax cuts is the most important thing we can do for our economy right now and he applauds the House for passing a permanent extension.” The statment confirmed that the discussions between the parties were continuing, but added that “any reports that we are near a deal in the tax cuts negotiations are inaccurate and premature.”

However, the Speaker-designate of the House, John Boehner, dismissed the bill as a “nonsense”, and said that the lame-duck Congress should “act today to cut spending and stop all the looming tax hikes.”

He disclosed, more colorfully, that he was “trying to catch my breath so I don't refer to this manoeuvre going on today as chicken crap,” adding that “the American people want us to stop all the looming tax hikes and to cut spending, and that should be the priority of the remaining days that we have in this Congress.”

TAGS: individuals | tax | small business | business | law | legislation | United States | individual income tax

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